2022 (6) TMI 700 - HC - VAT and Sales Tax

Validity of assessment order - levy of interest on belated payments of taxes in terms of Section 42(3) of the TNVAT Act - HELD THAT - Admittedly, no show cause notice for the levy of interest was ever issued - One feature in the 2016 assessments is that the computations refer to the position that admitted taxes, as per the returns filed under the Act, were itself not settled. In such an instance, the petitioner is liable to pay interest in terms of the Section 42 of the Act in regard to the admitted tax and such a levy is automatic. However, the impugned notice does not make a distinction between the components of the tax being admitted tax tax levied on additions made in assessment upon which interest has been levied, had this been done, and the assessing authority made a bifurcation as regards the interest related to the belated payment of admitted tax and the interest relating to the tax on added turnover, there would have been no necessity for further discussion in relation to the first category of interest - All that would have remained is for the assessee to make its submission in regard to the second component of interest, that is the interest on the payments of tax on additional turn over. However, this has not been done, as a result that there is no clarity on the bifurcation and consequently, the interest relating to the two components. Needless to say, if the admitted tax has been paid in time, the question of levying interest in 2019 for the remainder of the taxes, after a period of four years when the tax was paid, will not arise as the authorities are expected to have raised demands of interest concurrent with the tax demand or in any event, within a reasonable period of time thereafter. Petition disposed off.

Summary

Issues:
Challenges to demands under TNVAT Act, TNGST Act, and CST Act; irregular assessments; levy of interest on belated payments; lack of clarity in interest bifurcation; dispute over enhanced interest rate; absence of assessment orders under TNGST and CST.

Challenges to Demands under TNVAT Act, TNGST Act, and CST Act:
The petitioner, a company, challenged demands under the TNVAT Act, TNGST Act, and CST Act. The petitioner had faced management turmoil, leading to delays in resolving mismanagement allegations under the Companies Act, 2013. Upon regaining stability in 2015, the petitioner received arrears notices for TNVAT, TNGST, and CST, disavowing liability. TNVAT demands were challenged due to irregular assessments, eventually settled in full. However, a subsequent notice imposed interest on belated tax payments without prior show cause notice, raising concerns.

Levy of Interest on Belated Payments and Lack of Clarity in Bifurcation:
The 2016 assessments indicated unsettled admitted taxes, triggering automatic interest under Section 42 of the TNVAT Act. The impugned notice failed to differentiate between interest on admitted tax and tax levied on additional turnover, causing ambiguity. The court directed the petitioner to appear before the Assessing Authority to receive a bifurcation of tax amounts paid and interest levied. The lack of clarity necessitated further submissions to differentiate interest components accurately.

Dispute Over Enhanced Interest Rate and Absence of Assessment Orders:
The petitioner disputed the enhanced interest rate from 1.5% to 2% effective May 28, 2013, seeking to address this issue before the Assessing Authority. Similar concerns were raised for TNGST and CST demands, pending clarification due to the absence of assessment orders. Parties were scheduled to deliberate further on these matters during the hearing. The judgment emphasized timely payment of admitted taxes to avoid interest levies after an extended period, allowing the petitioner to present contentions during personal hearings.

In conclusion, the Writ Petitions challenging demands under various tax acts were disposed of with directions for the petitioner to address interest bifurcation issues, dispute over enhanced interest rates, and lack of clarity in TNGST and CST assessments during upcoming hearings. The judgment highlighted the importance of timely tax payments to avoid interest disputes and left all contentions open for further submissions before the authority.